Accounting Policies of Spicejet Ltd. Company

Mar 31, 2015

1. Corporate Information

SpiceJet Limited ('SpiceJet' or the 'Company') was incorporated on
February 9, 1984 as a limited Company under the Companies Act, 1956 and
is listed on the Bombay Stock Exchange Limited ('BSE'). The Company is
engaged principally in the business of providing air transport services
for the carriage of passengers and cargo. The Company is a low cost
carrier ('LCC') operating under the brand name of 'SpiceJet' in India
since May 23, 2005. The Company operates a fleet of 32 aircraft across
various routes in India as at March 31, 2015. SpiceJet has also
obtained permission of the Directorate General of Civil Aviation (DGCA)
to operate on selected routes outside India and commenced international
operations from October 2010.

During the current year, the Company has obtained the approval of the
Ministry of Civil Aviation ('MoCA'), for a "Scheme of Reconstruction
and Revival for the takeover of ownership, management and control of
SpiceJet Limited by Mr. Ajay Singh" ("the Scheme"). Pursuant to such
approval, a "Share Sale and Purchase Agreement" ("SSPA") dated January
29, 2015 was entered into amongst Mr. Kalanithi Maran and Kal Airways
Private Limited (hereinafter, "Outgoing Promoters"), the Company and
Mr. Ajay Singh, pursuant to which the Outgoing Promoters have sold and
transferred their entire shareholding of 350,428,758 equity shares
(58.46%) to Mr. Ajay Singh. Pursuant to this change, Mr. Ajay Singh has
been designated as the Company's promoter.

a) Basis of preparation of financial statements

The financial statements of the Company have been prepared in
accordance with the generally accepted accounting principles in India
(Indian GAAP). The Company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under section 133 of the Companies Act 2013, read together with
paragraph 7 of the Companies (Accounts) Rules 2014. The financial
statements have been prepared on an accrual basis and under the
historical cost convention. The accounting policies adopted in the
preparation of financial statements are consistent with those of the
previous year.

The Company has incurred a loss of Rs. 6,870.54 million for the year
ended March 31, 2015, and has accumulated losses of Rs. 32,108.02
million against shareholders' funds of Rs. 19,462.82 million. As of
this date, the Company's total liabilities exceed its total assets by
Rs. 12,645.20 million. Historically the Company's operating results
have been materially affected by various factors, including high
aviation turbine fuel ("ATF") costs, significant depreciation in the
value of the currency, and pricing pressures. On account of its
operational and financial position, the Company had also delayed
payments to various parties, including vendors and its dues to
statutory authorities, over the last 12-18 months. These factors have
resulted in a material uncertainty that may cause significant doubt
about the Company's ability to continue as a going concern.

In the last quarter of the current financial year, the Company has
entered into settlement agreements with certain lessors and vendors in
respect of past overdue payments, and also negotiated deferred payment
plans with certain vendors for overdue amounts as at March 31, 2015.
The Company has also significantly discharged its overdue obligations
to statutory authorities in the last quarter of the current financial
year. The Company continues to negotiate with vendors for improved
commercial terms and better credit facilities, and is confident of
negotiating settlements with parties to whom monies are owed. In view
of the foregoing, no further amounts of penalties on delayed payments
have been recorded in these financial statements. The Company is also
in the process of evaluating and exploring various courses of action
for raising funds for the Company's operations, including options for
strategic funding. In addition, as explained in the Note 1, Mr. Ajay
Singh has taken over as promoter of the Company. The Company has also
received advances from the Outgoing Promoters towards share warrants
and towards an option to subscribe to up to 3,750,000 CRPS, proposed to
be issued to them, subject to any necessary approvals (Also refer Note
4).

The Company continues to implement various measures such as enhancing
customer experience, improving selling and distribution, revenue
management, fleet rationalization, optimizing aircraft utilization,
redeployment of capacity in key focus markets, renegotiation of
contracts and other cost control measures, to help the Company
establish consistent profitable operations and cash flows in the
future. The Company is also exploring options to increase its aircraft
fleet size over the next financial year in order to enhance the scale
and depth of its operations across strategic markets. These measures as
well as improvement in the macroeconomic conditions for the airline
industry in the markets in which the Company operates, such as the
recent reduction in ATF prices, consistent improvement in capacity
utilization and unit revenues, as well as enhancement in ancillary
revenues, are expected to increase operational efficiency and achieve
profitability.

In view of the foregoing, management is of the view that the Company
will be able to raise funds as necessary to achieve profitable
operations and meet its liabilities they fall due. Accordingly, these
financial statements have been prepared on the basis that the Company
will continue as a going concern for the foreseeable future.

b) Use of estimates

The preparation of financial statements in conformity with Indian GAAP
requires management to make judgments, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on
management's best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.

c) Tangible fixed assets

Fixed assets are stated at cost, less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price and any
attributable cost of bringing the asset to its working condition for
its intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price.

The Company adjusts exchange differences arising on translation /
settlement of long term foreign currency monetary items pertaining to
the acquisition of a depreciable asset to the cost of the asset and
depreciates the same over remaining life of the asset.

The Company adjusts exchange differences arising on translation/
settlement of long-term foreign currency monetary items pertaining to
the acquisition of a depreciable asset to the cost of the asset and
depreciates the same over the remaining life of the asset. In
accordance with MCA circular dated August 9, 2012, exchange differences
adjusted to the cost of fixed assets are total differences, arising on
long-term foreign currency monetary items pertaining to the acquisition
of a depreciable asset, for the period. In other words, the company
does not differentiate between exchange differences arising from
foreign currency borrowings to the extent they are regarded as an
adjustment to the interest cost and other exchange difference.

Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.

Gains or losses arising from de-recognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.

The cost of fixed assets not ready for intended use before such date is
disclosed under capital work-in-progress.

d) Depreciation on tangible fixed assets

Till the year ended March 31, 2014, depreciation rates prescribed under
Schedule XIV were treated as minimum rates and the Company was not
allowed to charge depreciation at lower rates even if such lower rates
were justified by the estimated useful life of the asset. From the
current year Schedule VI has been replaced by Schedule II to the
Companies Act, 2013. Schedule II to the Companies Act 2013 prescribes
useful lives for fixed assets which, in many cases, are different from
lives prescribed under the erstwhile Schedule XIV. However, Schedule II
allows Companies to use higher / lower useful lives and residual values
if such useful lives and residual values can be technically supported
and justification for difference is disclosed in the financial
statements. Considering the applicability of Schedule II, the
management has re-estimated the useful lives and residual values of all
its fixed assets, except aircraft, and notables and tools. Assets
individually costing Rs. 5,000 or less are fully depreciated in the
year of purchase.

The management has estimated, supported by independent assessment by
professionals, the useful lives of the following classes of assets.

- The useful life of aircraft is estimated as 17.86 years, which is
lower than indicated in schedule II, which prescribes a useful life of
20 years.

- Rotables and tools are depreciated over the estimated useful lives of
17.86 years which is higher than indicated in schedule II, which
prescribes a useful life of 15 years.

Leasehold improvements are amortized over the estimated useful lives or
the remaining primary lease period, whichever is less. The average
useful life of leasehold improvements is between 4 to 6 years.

The management believes that the depreciation rates currently used
fairly reflect its estimate of the useful lives and residual values of
fixed assets, though these rates in certain cases are different from
the lives prescribed under Schedule II.

As a result of the adoption of useful lives prescribed in Schedule II
for specified classes of assets as discussed above, Rs. 24.40 million
has been adjusted against reserves in respect of assets whose useful
life has expired under Schedule II as on April 1, 2014 (also refer note
5). In respect of such assets, the adoption of useful lives indicated
in Schedule II has resulted in increase in depreciation expense for the
current year by Rs. 55.40 million as compared to the previous year.

In respect of aircraft and notables and tools, had the Company applied
the requirements of useful life and residual values specified under
Schedule II of the Act as described above, the depreciation expense for
the current year would have been lower by Rs. 87.55 million.

e) Intangible assets

Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Intangible assets are amortized on a
straight line basis over the estimated useful economic life.

Costs incurred towards purchase of computer software are depreciated
using the straight-line method over a period based on management's
estimate of useful lives of such software being 2 / 3 years, or over
the license period of the software, whichever is shorter.

f) Leases

Where the Company is a lessee

Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.

Notes to the Financial Statements for the year ended March 31, 2015

(All amounts are in millions of Indian Rupees, unless otherwise stated)

Sale and lease back arrangements

Profit or loss on sale and lease back arrangements resulting in
operating leases is recognized immediately in case the transaction is
established at fair value. If the sale price is below fair value, any
profit or loss is recognized immediately except that, if the loss is
compensated by future lease payments at below market price, it is
deferred and amortized in proportion to the lease payments over the
period for which the asset is expected to be used. If the sale price
is above fair value, the excess over the fair value is deferred and
amortized over the period for which the asset is expected to be used.

The sale and lease back arrangements entered into by the Company are as
per the standard commercial terms prevalent in the industry. The
Company does not have an option to buy back the aircraft, nor does it
have an option to renew or extend the lease after the expiry of the
lease.

g) Borrowing costs

Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings.

Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.

h) Impairment of tangible and intangible assets

The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Company
estimates the asset's recoverable amount. An asset's recoverable amount
is the higher of an asset's or cash-generating units (CGU) net selling
price and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. In determining net
selling price, recent market transactions are taken into account, if
available. If no such transactions can be identified, an appropriate
valuation model is used.

The Company bases its impairment calculation on detailed budgets and
forecast calculations which are prepared separately for each of the
Company's cash-generating units to which the individual assets are
allocated. These budgets and forecast calculations are generally
covering a period of five years. For longer periods, a long term growth
rate is calculated and applied to project future cash flows after the
fifth year.

Impairment losses of continuing operations, including impairment on
inventories, are recognized in the statement of profit and loss. After
impairment, depreciation is provided on the revised carrying amount of
the asset over its remaining useful life.

An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the Company
estimates the asset's or cash-generating unit's recoverable amount. A
previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset's
recoverable amount since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years. Such reversal is
recognized in the statement of profit and loss.

i) Inventories

Inventories are comprised of expendable aircraft spares and
miscellaneous stores. Inventories have been valued at cost or net
realizable value, whichever is lower after providing for obsolescence
and other losses, where considered necessary. Cost includes custom
duty, taxes, freight and other charges, as applicable and is determined
on a weighted average basis.

j) Revenue recognition

Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The revenue is recognized net of VAT / Service tax
(if any). The following specific recognition criteria must also be met
before revenue is recognized:

Service Income

Passenger revenues and cargo revenues are recognized as and when
transportation is provided i.e. when the service is rendered. Amounts
received in advance towards travel bookings / reservations are shown
under current liabilities as unearned revenue.

The unutilized balances in unearned revenue is recognized as income
based on past statistics, trends and management estimates, after
considering the Company's refund policy.

Revenue from wet lease of aircraft is recognized in accordance with the
terms of agreements with customers.

Income in respect of hiring / renting out of equipment and spare parts
is due on time proportion basis at rates agreed with the lessee. Due to
significant uncertainties involved in realization, the income is
recorded on settlement with the lessee or actual realization, whichever
is earlier.

Sale of food and beverages

Revenue from sale of food and beverages is recognized when the products
are sold to the customer. Amounts received in advance towards food and
beverages are shown under current liabilities as unearned revenue.

Training Income

Training Income is recognized upon completion of the related training
activities.

Export Incentives

Export incentives are recognized on satisfaction of conditions for a
ailment of benefits under the respective schemes provided the
realization of these benefits is certain as at the reporting date.

Interest

Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the rate applicable.

k) Manufacturers' incentives

Cash Incentives

The Company receives incentives from Original equipment manufacturers
('OEM's') of aircraft components in connection with acquisition of
aircraft under operating lease. These incentives are recognized as
income coinciding with delivery of the related aircraft.

Non-cash Incentives

Free of cost spare parts received in respect of purchase of aircraft's
are recorded at a nominal value.

Non cash incentives relating to aircraft taken on finance lease are
recorded as and when due to the Company by setting up a deferred asset
and a corresponding incentive. These incentives are recognized under
the head other income in the statement of profit and loss on a straight
line basis over the remaining life of the aircraft. The deferred asset
explained above is reduced on the basis of utilization against purchase
of goods and services.

l) Aircraft maintenance costs and engine repairs

Aircraft, Auxiliary Power Unit ('APU') and Engine maintenance and
repair costs are expensed as incurred. In cases where such overhaul or
repair costs in respect of engines / APU / other notables are covered
by third party maintenance agreements, these are accounted in
accordance therewith, along with adequate estimates.

m) Commission to agents

Commission expense is recognized as an expense based on terms agreed
with agents coinciding with the recognition of related revenues.

n) Foreign currency translation

Initial Recognition

Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.

Conversion

Foreign currency monetary items are reported using the exchange rate
prevailing at the reporting date. Non- monetary items which are
measured in terms of historical cost denominated in a foreign currency
are reported using the exchange rate at the date of the transaction;
and non-monetary items which are carried at fair value or other similar
valuation denominated in a foreign currency if any, are reported using
the exchange rates that existed when the values were determined.

Exchange Differences

The Company accounts for exchange differences arising on translation/
settlement of foreign currency monetary items as below:

- Exchange differences arising on long-term foreign currency monetary
items related to acquisition of a fixed asset are capitalized and
depreciated over the remaining useful life of the asset.

- Exchange differences arising on other long-term foreign currency
monetary items are accumulated in the "Foreign Currency Monetary Item
Translation Difference Account" and amortized over the remaining life
of the concerned monetary item.

- All other exchange differences are recognized as income or as
expenses in the period in which they arise.

The premium or discount arising at the inception of forward exchange
contract is amortized and recognized as an expense / income over the
life of the contract. Exchange differences on such contracts, except
the contracts which are long-term foreign currency monetary items, are
recognized in the statement of profit and loss in the period in which
the exchange rates change. Any profit or loss arising on cancellation
or renewal of such forward exchange contract is also recognized as
income or as expense for the period. Any gain / loss arising on forward
contracts which are long-term foreign currency monetary items is
recognized in accordance with paragraph on exchange differences above.

o) Retirement and other employee benefits

Retirement benefit in the form of provident fund is a defined
contribution scheme. The Company has no obligation, other than the
contribution payable to the provident fund. The Company recognizes
contribution payable to the provident fund scheme as expenditure, when
an employee renders the related service.

Gratuity liability under the Payment of Gratuity Act, 1972 is a defined
benefit obligation. The cost of providing benefits under this plan is
determined on the basis of actuarial valuation at each year-end.
Actuarial gains and losses are recognized in full in the period in
which they occur in the statement of profit and loss.

Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short-term employee benefit. The Company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.

The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year-end. Actuarial gains / losses are immediately taken to the
statement of profit and loss and are not deferred. The Company presents
the entire leave as a current liability in the balance sheet, since it
does not have an unconditional right to defer its settlement for 12
months after the reporting date.

p) Income taxes

Tax expense comprises current and deferred income taxes. Current income
tax is measured at the amount expected to be paid to the tax
authorities in accordance with the Income-tax Act, 1961 enacted in
India.

Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the reporting date.

Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized only to the extent that
there is reasonable certainty that sufficient future taxable income
will be available against which such deferred tax assets can be
realized. As the Company has unabsorbed depreciation or carry forward
tax losses, deferred tax assets are recognized only if there is virtual
certainty supported by convincing evidence that such deferred tax
assets can be realized against future taxable profits.

At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.

The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain that sufficient future taxable income will be
available.

Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets.

Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the Company recognizes MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement." The
Company reviews the "MAT credit entitlement" asset at each reporting
date and writes down the asset to the extent the Company does not have
convincing evidence that it will pay normal tax during the specified
period.

q) Employee stock compensation cost

Employees (including senior executives) of the Company receive
remuneration in the form of share based payment transactions, whereby
employees render services as consideration for equity instruments
(equity-settled transactions).

In accordance with the Securities and Exchange Board of India (Share
Based Employee Benefits) Regulations, 2014 and the Guidance Note on
Accounting for Employee Share-based Payments, the cost of
equity-settled transactions is measured using the intrinsic value
method. The cumulative expense recognized for equity-settled
transactions at each reporting date until the vesting date reflects the
extent to which the vesting period has expired and the Company's best
estimate of the number of equity instruments that will ultimately vest.
The expense or credit recognized in the statement of profit and loss
for a period represents the movement in cumulative expense recognized
as at the beginning and end of that period and is recognized in
employee benefits expense.

Where the terms of an equity-settled transaction award are modified,
the minimum expense recognized is the expense as if the terms had not
been modified, if the original terms of the award are met. An
additional expense is recognized for any modification that increases
the total intrinsic value of the share-based payment transaction, or is
otherwise beneficial to the employee as measured at the date of
modification.

r) Segment reporting

The Company's operations predominantly relate only to air
transportation services and accordingly this is the only primary
reportable segment. Further, the operations of the Company are
substantially limited within one geographical segment (India) and
accordingly this is considered the only reportable secondary segment.

s) Earnings Per Share ("EPS")

Basic EPS calculated by dividing the net profit or loss for the period
attributable to equity shareholders (after deducting preference
dividends and attributable taxes) by the weighted average number of
equity shares outstanding during the period.

For the purpose of calculating diluted EPS, the net profit or loss for
the period attributable to equity shareholders and the weighted average
number of shares outstanding during the period are adjusted for the
effects of all dilutive potential equity shares.

t) Provisions

A provision is recognized when the Company has a present obligation as
a result of past event and it is probable that an outflow of resources
will be required to settle the obligation, and a reliable estimate can
be made of the amount of obligation. Provisions are not discounted to
its present value and are determined based on best estimate of amounts
required to settle the obligation at the reporting date. These
estimates are reviewed at each reporting date and adjusted to reflect
the current best estimates.

Where the Company expects some or all of a provision to be reimbursed,
for example under an insurance contract, the reimbursement is
recognized as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is presented
in the statement of profit and loss net of any reimbursement.

u) Contingent liabilities

A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of Company or present obligation that is not recognized because
it is not probable that an outflow of resources will be required to
settle the obligation. A contingent liability also arises in cases
where there is a liability that cannot be recognized because it cannot
be measured reliably. The Company does not recognize a contingent
liability but discloses its existence in the financial statements.

v) Cash and cash equivalents

Cash and cash equivalents for the purpose of cash flow statement
comprise cash at bank and in hand and short- term investments with an
original maturity of three months or less.

The Company has elected to present EBITDA as a separate line item on
the face of the statement of profit and loss. The Company measures
EBITDA on the basis of profit / (loss) from continuing operations. In
its measurement, the Company does not include depreciation and
amortization, interest income, finance costs, tax expense and, where
applicable, prior period items.

Mar 31, 2014

A) Basis of preparation of financial statements

The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in India
(''Indian GAAP''). The Company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under the Companies Act, 1956, read with General Circular 8/2014 dated
April 4, 2014, issued by the Ministry of Corporate Affairs. The
financial statements have been prepared on an accrual basis and under
the historical cost convention. The accounting policies adopted in the
preparation of financial statements are consistent with those of
previous year.

The Company''s operating results continue to be materially affected by
various factors, particularly high aircraft fuel costs, significant
depreciation in the value of the currency, pricing pressures from
competition and general economic slowdown. The Company has incurred a
net loss of Rs. 10,032.44 during the year ended March 31, 2014, and as
of that date, the Company''s total liabilities exceeded its total assets
by Rs. 10,194.76. The Company is implementing various long-term
measures to improve its product offering and enhancing customer
experience. Considerable investments are also simultaneously being made
by the Company to improve selling and distribution channels, revenue
management and marketing functions. The Company has undertaken a
comprehensive review of its current network to maximize profitability
and improve efficiency in its operations. These measures along with
consistent improvement in yields and enhancement in ancillary revenues
are expected to drive growth in revenues in the future. The Company is
also implementing various measures to optimize aircraft utilization,
improving operational efficiencies, renegotiation of contracts and
other cost control measures to improve the Company''s operating results
and cash flows. In addition, the Company continues to explore various
options to raise finance in order to meet its short term and long term
obligations. The Company believes that these measures will not only
result in sustainable cash flows, but also enhance the Company''s plans
for expansion.

The promoters continue to be committed to providing the required
operational and financial support to Company in the foreseeable future.
During the year, the Promoter has converted 15,000,000 warrants into
equity shares of the Company thereby infusing additional funds of Rs.
407.03 into the Company. Further, the Company''s promoters have
subscribed to 64,169,000 warrants (convertible into equivalent no. of
equity shares) for which 25% upfront money amounting to Rs. 333.04 has
been received in the current year. In addition to the above, the
Company has availed of an unsecured loan of Rs. 750.00 from the
promoter, as well as an amount of Rs. 250.00 which has been provided as
an advance against the remaining subscription money to be received
consequent to the conversion of the warrants issued during the year.
The Company also believes that the amendment to FDI policy has improved
the investor sentiment towards the Indian aviation industry as
evidenced by entry of large international players into the Indian
market. In view of the foregoing, the Company''s financial statements
have been prepared on a going concern basis whereby the realization of
assets and discharge of liabilities are expected to occur in the normal
course of business.

b) Use of estimates

The preparation of financial statements in conformity with Indian GAAP
requires management to make judgments, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.

c) Tangible fixed assets

Fixed assets are stated at cost, less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price and any
attributable cost of bringing the asset to its working condition for
its intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price.The Company adjusts exchange differences
arising on translation/ settlement of long term foreign currency
monetary items pertaining to the acquisition of a depreciable asset to
the cost of the asset and depreciates the same over remaining life of
the asset.

In accordance with MCA circular dated August 9, 2012, exchange
differences adjusted to the cost of fixed assets are total differences,
arising on long-term foreign currency monetary items pertaining to the
acquisition of a depreciable asset, for the period. In other words, the
Company does not differentiate between exchange differences arising
from foreign currency borrowings to the extent they are regarded as an
adjustment to the interest cost and other exchange difference.

Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.

Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.

Borrowing costs relating to acquisition of fixed assets which takes
substantial period of time to get ready for its intended use are also
included to the extent they relate to the period till such assets are
ready to be put to use.

The cost of fixed assets not rea d y for intended use before such date
is disclosed un der capital w ork-in-progress.

d) Depreciation on tangible fixed assets

Depreciation is provided using the straight line method in the manner
specified in Schedule XIV to the Act, at the rates prescribed therein
or at the rates based on management''s estimate of the useful lives of
such assets, whichever is higher, as follows:

Leasehold improvements are amortised over the estimated useful lives or
the remaining primary lease period, whichever is less. The average
useful life of leasehold improvements is between 4 to 6 years.

Assets individually costing Rupees five thousand or less are fully
depreciated in the year of purchase.

e) Intangible assets

Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Intangible assets are amortized on a
straight line basis over the estimated useful economic life.

Costs incurred towards purchase of computer software are depreciated
using the straight-line method over a period based on management''s
estimate of useful lives of such software being 2 / 3 years, or over
the license period of the software, whichever is shorter.

f) Leases

Where the Company is a lessee

Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.

Sale and lease back arrangements

Profit or loss on sale and lease back arrangements resulting in
operating leases is recognized immediately in case the transaction is
established at fair value. If the sale price is below fair value, any
profit or loss is recognised immediately except that, if the loss is
compensated by future lease payments at below market price, it is
deferred and amortised in proportion to the lease payments over the
period for which the asset is expected to be used. If the sale price is
above fair value, the excess over the fair value is deferred and
amortized over the period for which the asset is expected to be used.

The sale and lease back arrangements entered into by the Company are as
per the standard commercial terms prevalent in the industry. The
Company does not have an option to buy back the aircraft, nor does it
have an option to renew or extend the lease after the expiry of the
lease.

g) Borrowing costs

Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings.

Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.

h) Impairment of tangible and intangible assets

The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Company
estimates the asset''s recoverable amount. An asset''s recoverable amount
is the higher of an asset''s or cash-generating units (CGU) net selling
price and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. In determining net
selling price, recent market transactions are taken into account, if
available. If no such transactions can be identified, an appropriate
valuation model is used.

The Company bases its impairment calculation on detailed budgets and
forecast calculations which are prepared separately for each of the
Company''s cash-generating units to which the individual assets are
allocated. These budgets and forecast calculations are generally
covering a period of five years. For longer periods, a long term growth
rate is calculated and applied to project future cash flows after the
fifth year.

Impairment losses of continuing operations, including impairment on
inventories, are recognized in the statement of profit and loss.After
impairment, depreciation is provided on the revised carrying amount of
the asset over its remaining useful life.

An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the Company
estimates the asset''s or cash-generating unit''s recoverable amount. A
previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset''s
recoverable amount since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years. Such reversal is
recognized in the statement of profit and loss.

i) Inventories

Inventories comprises of expendable aircraft spares and miscellaneous
stores. Inventories have been valued at cost or net realizable value,
whichever is lower after providing for obsolescence and other losses,
where considered necessary. Cost includes custom duty, taxes, freight
and other charges, as applicable and is determined on a weighted
average basis.

j) Revenue recognition

Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.The revenue is recognized net of VAT / Service tax
(if any). The following specific recognition criteria must also be met
before revenue is recognized:

Service Income

Passenger revenues and cargo revenues are recognised as and when
transportation is provided i.e. when the service is rendered. Amounts
received in advance towards travel bookings / reservations are shown
under current liabilities as unearned revenue.

The unutilized balances in unearned revenue is recognized as income
based on past statistics, trends and management estimates, after
considering the Company''s refund policy.

Revenues from special service requests in the nature of fees charged
from passengers for reservation, changes in itinerary, cancellation of
flight tickets etc. are recognised as revenues on rendering of the
related services.

Revenue from wet lease of aircrafts is recognised in accordance with
the terms of agreements with customers.

Income in respect of hiring / renting out of equipments and spare parts
is due on time proportion basis at rates agreed with the lessee. Due to
significant uncertainties involved in realization, the income is
recorded on settlement with the lessee or actual realization, whichever
is earlier.

Sale of food and beverages

Revenue from sale of food and beverages is recognised when the products
are sold to the customer. Amounts received in advance towards food and
beverages are shown under current liabilities as unearned revenue.

Training Income

Training Income is recognized upon completion of the related training
activities.

Export Incentives

Export incentives are recognized on satisfaction of conditions for
availment of benefits under the respective schemes provided the
realization of these benefits is certain as at the reporting date.

Interest

Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the rate applicable.

k) Manufacturers incentives

Cash Incentives

The Company receives incentives from Original equipment manufacturers
(''OEM''s'') of aircraft components in connection with acquisition of
aircrafts. As the related aircrafts are held under operating lease by
the Company, these incentives are recognized as income coinciding with
delivery of the related aircrafts.

Non-cash Incentives

Free of cost spare parts received in respect of purchase of aircraft''s
are recorded at a nominal value.

Non cash incentives relating to aircrafts taken on finance lease are
recorded as and when due to the Company by setting up a deferred asset
and a corresponding incentive. These incentives are recognized under
the head other income in the statement of profit and loss on a straight
line basis over the remaining life of the aircraft. The deferred asset
explained above is reduced on the basis of utilization against purchase
of goods and services.

l) Aircraft maintenance costs and engine repairs

Aircraft, Auxiliary Power Unit (''APU'') and Engine maintenance and
repair costs are expensed as incurred. In cases where such overhaul or
repair costs in respect of engines / APU / other rotables are covered
by third party maintenance agreements, these are accounted in
accordance therewith, along with adequate estimates.

m) Commission to agents

Commission expense is recognized as an expense based on terms agreed
with agents coinciding with the recognition of related revenues.

n) Foreign currency translation

Initial Recognition

Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.

Conversion

Foreign currency monetary items are reported using the exchange rate
prevailing at the reporting date. Non-monetary items which are
measured in terms of historical cost denominated in a foreign currency
are reported using the exchange rate at the date of the transaction;
and non-monetary items which are carried at fair value or other similar
valuation denominated in a foreign currency if any, are reported using
the exchange rates that existed when the values were determined.

Exchange Differences

The Company accounts for exchange differences arising on translation/
settlement of foreign currency monetary items as below:

- Exchange differences arising on long-term foreign currency monetary
items related to acquisition of a fixed asset are capitalized and
depreciated over the remaining useful life of the asset.

- Exchange differences arising on other long-term foreign currency
monetary items are accumulated in the "Foreign Currency Monetary Item
Translation Difference Account" and amortized over the remaining life
of the concerned monetary item.

- All other exchange differences are recognized as income or as
expenses in the period in which they arise.

The premium or discount arising at the inception of forward exchange
contract is amortized and recognized as an expense/ income over the
life of the contract. Exchange differences on such contracts, except
the contracts which are long-term foreign currency monetary items, are
recognized in the statement of profit and loss in the period in which
the exchange rates change. Any profit or loss arising on cancellation
or renewal of such forward exchange contract is also recognized as
income or as expense for the period. Any gain/ loss arising on forward
contracts which are long-term foreign currency monetary items is
recognized in accordance with paragraph on exchange differences above.

o) Retirement and other employee benefits

Retirement benefit in the form of provident fund is a defined
contribution scheme. The Company has no obligation, other than the
contribution payable to the provident fund. The Company recognizes
contribution payable to the provident fund scheme as expenditure, when
an employee renders the related service.

Gratuity liability under the Payment of Gratuity Act, 1972 is a defined
benefit obligation.The cost of providing benefits under this plan is
determined on the basis of actuarial valuation at each year-end.
Actuarial gains and losses are recognized in full in the period in
which they occur in the statement of profit and loss.

Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short-term employee benefit. The Company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.

The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long- term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year-end. Actuarial gains/losses are immediately taken to the statement
of profit and loss and are not deferred. The Company presents the
entire leave as a current liability in the balance sheet, since it does
not have an unconditional right to defer its settlement for 12 months
after the reporting date.

p) Income taxes

Tax expense comprises current and deferred income taxes. Current income
tax is measured at the amount expected to be paid to the tax
authorities in accordance with the Income-tax Act, 1961 enacted in
India.

Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years.Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the reporting date.

Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognised only to the extent that
there is reasonable certainty that sufficient future taxable income
will be available against which such deferred tax assets can be
realised. As the Company has unabsorbed depreciation or carry forward
tax losses, deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that such deferred tax
assets can be realised against future taxable profits.

At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.

The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised.Any such write-down is reversed to the extent that it becomes
reasonably certain that sufficient future taxable income will be
available.

Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets.

Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the Company recognizes MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement." The
Company reviews the "MAT credit entitlement" asset at each reporting
date and writes down the asset to the extent the Company does not have
convincing evidence that it will pay normal tax during the specified
period.

q) Employee stock compensation cost

Employees (including senior executives) of the Company receive
remuneration in the form of share based payment transactions, whereby
employees render services as consideration for equity instruments
(equity-settled transactions).

In accordance with the SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
Accounting for Employee Share-based Payments, the cost of
equity-settled transactions is measured using the intrinsic value
method and recognized, together with a corresponding increase in the
"Stock options outstanding account" in reserves. The cumulative expense
recognized for equity-settled transactions at each reporting date until
the vesting date reflects the extent to which the vesting period has
expired and the Company''s best estimate of the number of equity
instruments that will ultimately vest. The expense or credit recognized
in the statement of profit and loss for a period represents the
movement in cumulative expense recognized as at the beginning and end
of that period and is recognized in employee benefits expense.

Where the terms of an equity-settled transaction award are modified,
the minimum expense recognized is the expense as if the terms had not
been modified, if the original terms of the award are met. An
additional expense is recognized for any modification that increases
the total intrinsic value of the share-based payment transaction, or is
otherwise beneficial to the employee as measured at the date of
modification.

r) Segment reporting

The Company''s operations predominantly relate only to air
transportation services and accordingly this is the only primary
reportable segment. Further, the operations of the Company are
substantially limited within one geographical segment (India) and
accordingly this is considered the only reportable secondary segment.

s) Earnings Per Share ("EPS")

Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.

t) Provisions

A provision is recognized when the Company has a present obligation as
a result of past event and it is probable that an outflow of resources
will be required to settle the obligation, and a reliable estimate can
be made of the amount of obligation. Provisions are not discounted to
its present value and are determined based on best estimate of amounts
required to settle the obligation at the reporting date. These
estimates are reviewed at each reporting date and adjusted to reflect
the current best estimates.

Where the Company expects some or all of a provision to be reimbursed,
for example under an insurance contract, the reimbursement is
recognized as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is presented
in the statement of profit and loss net of any reimbursement.

u) Contingent liabilities

A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of Company or present obligation that is not recognized because
it is not probable that an outflow of resources will be required to
settle the obligation. A contingent liability also arises in extremely
rare cases where there is a liability that cannot be recognized because
it cannot be measured reliably. The Company does not recognise a
contingent liability but discloses its existence in the financial
statements.

v) Cash and cash equivalents

Cash and cash equivalents for the purpose of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.

As permitted by the Guidance Note on the Revised Schedule VI to the
Companies Act, 1956, the Company has elected to present EBITDA as a
separate line item on the face of the statement of profit and loss. The
Company measures EBITDA on the basis of profit / (loss) from continuing
operations. In its measurement, the Company does not include
depreciation and amortization, interest income, finance costs, tax
expenseand, where applicable, prior period items.

Mar 31, 2013

A) Basis of preparation of financial statements

The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in India
(''Indian GAAP''). The Company has prepared these financial
statements to comply in all material respects with the accounting
standards notified under the Companies (Accounting Standards) Rules,
2006, (as amended) and the relevant provisions of the Companies Act,
1956. The financial statements have been prepared on an accrual basis
and under the historical cost convention. The accounting policies
adopted in the preparation of financial statements are consistent with
those of previous year.

The Company continues to achieve significant growth in revenues during
the year and has also managed to improve yields on a consistent basis.
The Company''s operating results continue to be materially affected by
various factors, particularly high aircraft fuel costs, significant
depreciation in the value of the currency and general economic
slowdown. The Company has continuously implemented various measures
such as fare and route rationalization, optimizing aircraft utilization
(including short-term leasing out of aircrafts), improving operational
efficiencies, renegotiation of contracts and other cost control
measures to improve the Company''s operating results and cash flows.
In addition, the Company continues to explore various options to raise
finance in order to meet its short term and long term obligations, with
the promoters infusing additional funds in the current year and being
committed to provide operational and financial support. The Company
believes that the recent amendments to FDI policy will improve the
investor sentiment towards the Indian aviation industry and that its
measures will not only result in sustainable cash flows, but also
enhance the Company''s plans for expansion. Accordingly, the
Company''s financial statements have been prepared on a going concern
basis whereby the realization of assets and discharge of liabilities
are expected to occur in the normal course of business.

b) Use of estimates

The preparation of financial statements in conformity with Indian GAAP
requires management to make judgments, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on
management''s best knowledge of current events and actions,
uncertainty about these assumptions and estimates could result in the
outcomes requiring a material adjustment to the carrying amounts of
assets or liabilities in future periods.

c) Tangible fixed assets

Fixed assets are stated at cost, less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price and any
attributable cost of bringing the asset to its working condition for
its intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price. For accounting periods commencing on or
after December 7, 2006, the Company adjusts exchange differences
arising on translation / settlement of long term foreign currency
monetary items pertaining to the acquisition of a depreciable asset to
the cost of the asset and depreciates the same over remaining life of
the asset.

Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.

The Company adjusts exchange differences arising on translation /
settlement of long-term foreign currency monetary items pertaining to
the acquisition of a depreciable asset to the cost of the asset and
depreciates the same over the remaining life of the asset. In
accordance with MCA circular dated August 9, 2012, exchange differences
adjusted to the cost of fixed assets are total differences, arising on
long-term foreign currency monetary items pertaining to the acquisition
of a depreciable asset, for the period. In other words, the Company
does not differentiate between exchange differences arising from
foreign currency borrowings to the extent they are regarded as an
adjustment to the interest cost and other exchange difference.

Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.

Borrowing costs relating to acquisition of fixed assets which takes
substantial period of time to get ready for its intended use are also
included to the extent they relate to the period till such assets are
ready to be put to use.

The cost of fixed assets not ready for intended use before such date is
disclosed under capital work-in-progress.

d) Depreciation on tangible fixed assets

Depreciation is provided using the straight line method in the manner
specified in Schedule XIV to theAct, at the rates prescribed therein or
at the rates based on management''s estimate of the useful lives of
such assets, whichever is higher, as follows:

Leasehold improvements are amortised over the estimated useful lives or
the remaining primary lease period, whichever is less. The average
useful life of leasehold improvements is between 4 to 6 years.

Assets individually costing Rupees five thousand or less are fully
depreciated in the year of purchase.

e) Intangible assets

Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Intangible assets are amortized on a
straight line basis over the estimated useful economic life.

Costs incurred towards purchase of computer software are depreciated
using the straight-line method over a period based on management''s
estimate of useful lives of such software being 3 years, or over the
license period of the software, whichever is shorter.

f) Leases

Where the Company is a lessee

Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.

Sale and lease back arrangements

Profit or loss on sale and lease back arrangements resulting in
operating leases is recognized immediately in case the transaction is
established at fair value. If the sale price is below fair value, any
profit or loss is recognised immediately except that, if the loss is
compensated by future lease payments at below market price, it is
deferred and amortised in proportion to the lease payments over the
period for which the asset is expected to be used. If the sale price is
above fair value, the excess over the fair value is deferred and
amortized over the period for which the asset is expected to be used.

The sale and lease back arrangements entered into by the Company are as
per the standard commercial terms prevalent in the industry. The
Company does not have an option to buy back the aircraft, nor does it
have an option to renew or extend the lease after the expiry of th
lease.

g) Borrowing costs

Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings.

Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.

h) Impairment of tangible and intangible assets

The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Company
estimates the asset''s recoverable amount. An asset''s recoverable
amount is the higher of an asset''s or cash-generating units (CGU) net
selling price and its value in use. The recoverable amount is
determined for an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from other assets or
groups of assets. Where the carrying amount of an asset or CGU exceeds
its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. In assessing value in use, the
estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. In determining
net selling price, recent market transactions are taken into account,
if available. If no such transactions can be identified, an appropriate
valuation model is used.

The Company bases its impairment calculation on detailed budgets and
forecast calculations which are prepared separately for each of the
Company''s cash-generating units to which the individual assets are
allocated. These budgets and forecast calculations are generally
covering a period of five years. For longer periods, a long term growth
rate is calculated and applied to project future cash flows after the
fifth year.

Impairment losses of continuing operations, including impairment on
inventories, are recognized in the statement of profit and loss. After
impairment, depreciation is provided on the revised carrying amount of
the asset over its remaining useful life.

An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the Company
estimates the asset''s or cash-generating unit''s recoverable amount.
A previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset''s
recoverable amount since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years. Such reversal is
recognized in the statement of profit and loss.

i) Inventories

Inventories comprises of expendable aircraft spares and miscellaneous
stores. Inventories have been valued at cost or net realizable value,
whichever is lower after providing for obsolescence and other losses,
where considered necessary. Cost includes custom duty, taxes, freight
and other charges, as applicable and is determined on a weighted
average basis.

j) Revenue recognition

Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The revenue is recognized net of VAT / Service tax
(if any). The following specific recognition criteria must also be met
before revenue is recognized:

Service Income

Passenger revenues and cargo revenues are recognised as and when
transportation is provided i.e. when the service is rendered. Amounts
received in advance towards travel bookings / reservations are shown
under current liabilities as unearned revenue.

Revenues from special service requests in the nature of fees charged
from passengers for reservation, changes in itinerary, cancellation of
flight tickets etc. are recognised as revenues on rendering of the
related services.

Income in respect of hiring / renting out of equipments and spare parts
is due on time proportion basis at rates agreed with the lessee. Due to
significant uncertainties involved in realization, the income is
recorded on settlement with the lessee or actual realization, whichever
is earlier.

Training Income

Training Income is recognized upon completion of the related training
activities.

Export Incentives

Export incentives are recognized on satisfaction of conditions for
availment of benefits under the respective schemes, provided the
realization of these benefits is certain as at the reporting date.

Interest

Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the rate applicable.

k) Manufacturers incentives

Cash Incentives

The Company receives incentives from Original equipment manufacturers
(''OEM''s'') of aircraft components in connection with acquisition
of aircrafts. As the related aircrafts are held under operating lease
by the Company, these incentives are recognized as income coincidiwith
delivery of the related aircrafts.

Non-cash Incentives

Free of cost spare parts received in respect of purchase of
aircraft''s are recorded at a nominal value.

Non cash incentives relating to aircrafts taken on finance lease are
recorded as and when due to the Company by setting up a deferred asset
and a corresponding incentive. These incentives are recognized under
the head other income in the statement of profit and loss on a straight
line basis over the remaining lease period of the related lease. The
deferred asset explained above is reduced on the basis of utilization
against purchase of goods and services.

l) Aircraft maintenance costs and engine repairs

Aircraft, Auxiliary Power Unit (''APU'') and Engine maintenance and
repair costs are expensed as incurred. In cases where such overhaul
costs in respect of engines / APU are covered by third party
maintenance agreements, these are accounted in accordance therewith,
along with adequate estimates.

m) Foreign currency translation

Initial Recognition

Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.

Conversion

Foreign currency monetary items are reported using the exchange rate
prevailing at the reporting date. Non-monetary items which are measured
in terms of historical cost denominated in a foreign currency are
reported using the exchange rate at the date of the transaction; and
non-monetary items which are carried at fair value or other similar
valuation denominated in a foreign currency if any, are reported using
the exchange rates that existed when the values were determined.

Exchange Differences

The Company accounts for exchange differences arising on translation/
settlement of foreign currency monetary items as below:

- Exchange differences arising on long-term foreign currency monetary
items related to acquisition of a fixed asset are capitalized and
depreciated over the remaining useful life of the asset.

- Exchange differences arising on other long-term foreign currency
monetary items are accumulated in the "Foreign Currency Monetary Item
Translation Difference Account" and amortized over the remaining life
of the concerned monetary item.

- All other exchange differences are recognized as income or as
expenses in the period in which they arise.

The premium or discount arising at the inception of forward exchange
contract is amortized and recognized as an expense / income over the
life of the contract. Exchange differences on such contracts, except
the contracts which are long-term foreign currency monetary items, are
recognized in the statement of profit and loss in the period in which
the exchange rates change. Any profit or loss arising on cancellation
or renewal of such forward exchange contract is also recognized as
income or as expense for the period. Any gain/ loss arising on forward
contracts which are long-term foreign currency monetary items is
recognized in accordance with paragraph on exchange differences above.

n) Retirement and other employee benefits

Retirement benefit in the form of provident fund is a defined
contribution scheme. The Company has no obligation, other than the
contribution payable to the provident fund. The Company recognizes
contribution payable to the provident fund scheme as expenditure, when
an employee renders the related service.

Gratuity liability under the Payment of Gratuity Act, 1972 is a defined
benefit obligation. The cost of providing benefits under this plan is
determined on the basis of actuarial valuation at each year-end.
Actuarial gains and losses are recognized in full in the period in
which they occur in the statement of profit and loss.

Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short-term employee benefit. The Company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.

The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year-end. Actuarial gains / losses are immediately taken to the
statement of profit and loss and are not deferred. The Company presents
the entire leave as a current liability in the balance sheet, since it
does not have an unconditional right to defer its settlement for 12
months after the reporting date.

o) Income taxes

Tax expense comprises current and deferred income taxes. Current income
tax is measured at the amount expected to be paid to the tax
authorities in accordance with the Income-tax Act, 1961 enacted in
India.

Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the reporting date.

Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognised only to the extent that
there is reasonable certainty that sufficient future taxable i ncome
will be available against which such deferred tax assets can be
realised. As the Company has unabsorbed depreciation or carry forward
tax losses, deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that such deferred tax
assets can be realised against future taxable profits.

At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.

The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain that sufficient future taxable income will be
available.

Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets.

Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the Company recognizes MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement."
The Company reviews the "MAT credit entitlement" asset at each
reporting date and writes down the asset to the extent the Company does
not have convincing evidence that it will pay normal tax during the
specified period.

p) Employee stock compensation cost

Employees (including senior executives) of the Company receive
remuneration in the form of share based payment transactions, whereby
employees render services as consideration for equity instruments
(equity-settled transactions).

In accordance with the SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
Accounting for Employee Share-based Payments, the cost of
equity-settled transactions is measured using the intrinsic value
method and recognized, together with a corresponding increase in the
"Stock options outstanding account" in reserves. The cumulative
expense recognized for equity-settled transactions at each reporting
date until the vesting date reflects the extent to which the vesting
period has expired and the Company''s best estimate of the number of
quity instruments that will ultimately vest. The expense or credit
recognized in the statement of profit and loss for a period represents
the movement in cumulative expense recognized as at the beginning and
end of that period and is recognized in employee benefits expense.

Where the terms of an equity-settled transaction award are modified,
the minimum expense recognized is the expense as if the terms had not
been modified, if the original terms of the award are met. An
additional expense is recognized for any modification that increases
the total intrinsic value of the share-based payment transaction, or is
otherwise beneficial to the employee as measured at the date of
modification.

q) Segment reporting

The Company''s operations predominantly relate only to air
transportation services and accordingly this is the only primary
reportable segment. Further, the operations of the Company are
substantially limited within one geographical segment (India) and
accordingly this is considered the only reportable secondary segment.

r) Earnings Per Share ("EPS")

Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.

s) Provisions

A provision is recognized when the Company has a present obligation as
a result of past event and it is probable that an outflow of resources
will be required to settle the obligation, and a reliable estimate can
be made of the amount of obligation. Provisions are not discounted to
its present value and are determined based on best estimate of amounts
required to settle the obligation at the reporting date. These
estimates are reviewed at each reporting date and adjusted to reflect
the current best estimates.

Where the Company expects some or all of a provision to be reimbursed,
for example under an insurance contract, the reimbursement is
recognized as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is presented
in the statement of profit and loss net of any reimbursement.

t) Contingent liabilities

A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or non
occurrence of one or more uncertain future events beyond the control of
Company or present obligation that is not recognized because it is not
probable that an outflow of resources will be required to settle the
obligation. A contingent liability also arises in extremely rare cases
where there is a liability that cannot be recognized because it cannot
be measured reliably. The Company does not recognise a contingent
liability but discloses its existence in the financial statements.

u) Cash and cash equivalents

Cash and cash equivalents for the purpose of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.

As permitted by the Guidance Note on the Revised Schedule VI to the
Companies Act, 1956, the Company has elected to present EBITDA as a
separate line item on the face of the statement of profit and loss. The
Company measures EBITDA on the basis of profit / (loss) from continuing
operations. In its measurement, the Company does not include
depreciation and amortization, interest income, finance costs, tax
expense and, where applicable, prior period items.

Mar 31, 2012

A) Basis of preparation of financial statements

The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in India
('Indian GAAP'). The Company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under the Companies (Accounting Standards) Rules, 2006, (as amended)
and the relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on an accrual basis and under the
historical cost convention. The accounting policies adopted in the
preparation of financial statements are consistent with those of
previous year.

The current year's financial statements have been prepared and
presented in accordance with the requirements of the revised Schedule
VI, as notified under the Companies Act, 1956 and applicable to the
Company. The Company has also reclassified previous year figures in
accordance with these requirements.

The Company has achieved significant growth in revenues for the year
and has also managed to achieve better yields towards the end of the
year. However, the Company's operating results has been materially
affected by various factors, particularly high aircraft fuel costs,
significant depreciation in the value of the currency and general
economic slowdown. The Company has been actively implementing various
measures such as fare and route rationalization, optimizing aircraft
utilization, improving operational efficiencies, renegotiation of
contracts and other cost control measures to improve the Company's
operating results and cash flows. Subsequent to the close of the
financial year, business conditions have improved and the Company
expects to perform better in the future. In addition, the Company
continues to explore various options to raise finance in order to meet
its short term and long term obligations, with the promoters infusing
additional capital during and post the year end. The Company believes
that these measures will not only result in sustainable cash flows, but
also enhance the Company's plans of expansion. Accordingly, the
Company's financial statements have been prepared on a going concern
basis whereby the realization of assets and discharge of liabilities
are expected to occur in the normal course of business.

b) Use of estimates

The preparation of financial statements in conformity with Indian GAAP
requires management to make judgments, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on
management's best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.

c) Tangible fixed assets

Fixed assets are stated at cost, less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price and any
attributable cost of bringing the asset to its working condition for
its intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price. For accounting periods commencing on
or after December 7, 2006, the Company adjusts exchange differences
arising on translation / settlement of long term foreign currency
monetary items pertaining to the acquisition of a depreciable asset to
the cost of the asset and depreciates the same over remaining life of
the asset.

Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.

Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.

Borrowing costs relating to acquisition of fixed assets which takes
substantial period of time to get ready for its intended use are also
included to the extent they relate to the period till such assets are
ready to be put to use.

The cost of fixed assets not ready for intended use before such date is
disclosed under capital work- in-progress.

d) Depreciation on tangible fixed assets

Depreciation is provided using the straight line method in the manner
specified in Schedule XIV to the Act, at the rates prescribed therein
or at the rates based on management's estimate of the useful lives of
such assets, whichever is higher, as follows:

Asset Description Percentage

Office Equipment 4.75%

Computers 16.21%

Furniture and Fixtures 6.33%
Motor Vehicles 9.50% - 11.31%

Plant and Machinery 4.75%

Aircrafts 5.60%

Rotable and Tools 5.60%

Leasehold improvements are amortised over the estimated useful lives or
the remaining primary lease period, whichever is less. Assets
individually costing Rupees five thousand or less are fully depreciated
in the year of purchase.

e) Intangible assets

Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Intangible assets are amortized on a
straight line basis over the estimated useful economic life.

Costs incurred towards purchase of computer software are depreciated
using the straight-line method over a period based on management's
estimate of useful lives of such software being 3 years, or over the
license period of the software, whichever is shorter.

f) Leases

Where the Company is a lessee

Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss account on a straight-line basis over the lease
term. Lease management fee, legal charges and other initial direct
costs of lease are capitalized.

Sale and lease back arrangements

Profit or loss on sale and lease back arrangements resulting in
operating leases are recognized immediately in case the transaction is
established at fair value. If the sale price is below fair value, any
profit or loss is recognised immediately except that, if the loss is
compensated by future lease payments at below market price, it is
deferred and amortised in proportion to the lease payments over the
period for which the asset is expected to be used. If the sale price is
above fair value, the excess over the fair value is deferred and
amortized over the period for which the asset is expected to be used.

The sale and lease back arrangements entered into by the Company are as
per the standard commercial terms prevalent in the industry. The
Company does not have an option to buy back the aircraft, nor does it
have an option to renew or extend the lease after the expiry of the
lease.

g) Borrowing costs

Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.

Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur. Borrowing costs consist of interest
and other costs that an entity incurs in connection with the borrowing
of funds.

h) Impairment of tangible and intangible assets

The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Company
estimates the asset's recoverable amount. An asset's recoverable amount
is the higher of an asset's or cash-generating unit's (CGU) net selling
price and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. In determining net
selling price, recent market transactions are taken into account, if
available. If no such transactions can be identified, an appropriate
valuation model is used.

The Company bases its impairment calculation on detailed budgets and
forecast calculations which are prepared separately for each of the
Company's cash-generating units to which the individual assets are
allocated. These budgets and forecast calculations are generally
covering a period of five years. For longer periods, a long term growth
rate is calculated and applied to project future cash flows after the
fifth year.

Impairment losses of continuing operations, including impairment on
inventories, are recognized in the statement of profit and loss. After
impairment, depreciation is provided on the revised carrying amount of
the asset over its remaining useful life.

An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the Company
estimates the asset's or cash-generating unit's recoverable amount. A
previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset's
recoverable amount since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years. Such reversal is
recognized in the statement of profit and loss.

i) Inventories

Inventories comprises of expendable aircraft spares and miscellaneous
stores. Inventories have been valued at cost or net realizable value,
whichever is lower after providing for obsolescence and other losses,
where considered necessary. Cost includes custom duty, taxes, freight
and other charges, as applicable and is determined on a weighted
average basis.

j) Revenue recognition

Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The revenue is recognized net of VAT / Service tax
(if any).

Service Income

Passenger revenues and cargo revenues are recognised as and when
transportation is provided i.e. when the service is rendered. Amounts
received in advance towards travel bookings / reservations are shown
under current liabilities as unearned revenue.

Revenues from special service requests in the nature of fees charged
from passengers for reservation, changes in itinerary, cancellation of
flight tickets etc. are recognised as revenues on rendering of the
related services.

Income in respect of hiring / renting out of equipments and spare parts
is due on time proportion basis at rates agreed with the lessee. Due to
significant uncertainties involved in realization, the income is
recorded on settlement with the lessee or actual realization, whichever
is earlier.

Training Income

Training Income is recognized upon completion of the related training
activities.

Export Incentives

Export incentives are recognized on availment of the benefits under the
respective schemes.

Interest

Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the rate applicable. Interest income
is included under the head "Other Income" in the statement of profit
and loss.

k) Manufacturers incentives

Cash Incentives

The Company receives incentives from Original equipment manufacturers
('OEM's') of aircraft components in connection with acquisition of
aircrafts. As the related aircrafts are held under operating lease by
the Company, these incentives are recognized as income coinciding with
delivery of the related aircrafts.

Non-cash Incentives

Free of cost spare parts received in respect of purchase of aircraft's
are recorded at a nominal value.

Non cash incentives relating to aircrafts taken on finance lease are
recorded as and when due to the Company by setting up a deferred asset
and a corresponding incentive. These incentives are recognized under
the head other income in the statement of profit and loss on a straight
line basis over the remaining lease period of the related lease.

The deferred asset explained above is reduced on the basis of
utilization against purchase of goods and services.

l) Aircraft maintenance costs and engine repairs

Aircraft, Auxiliary Power Unit ('APU') and Engine maintenance and
repair costs are expensed as incurred. In cases where such overhaul
costs in respect of engines / APU are covered by third party
maintenance agreements, these are accounted in accordance therewith,
along with adequate estimates.

m) Foreign currency translation

Initial Recognition

Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.

Conversion

Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.

Exchange Differences

With effect from accounting periods commencing on or after December 7,
2006, the Company accounts for exchange differences arising on
translation / settlement of foreign currency monetary items as below:

- Exchange differences arising on long-term foreign currency monetary
items related to acquisition of a fixed asset are capitalized and
depreciated over the remaining useful life of the asset. For this
purpose, the Company treats a foreign monetary item as "long-term
foreign currency monetary item", if it has a term of 12 months or more
at the date of its origination.

- Exchange differences arising on other long-term foreign currency
monetary items are accumulated in the "Foreign Currency Monetary Item
Translation Difference Account" and amortized over the remaining life
of the concerned monetary item.

- All other exchange differences are recognized as income or as
expenses in the period in which they arise.

n) Retirement and other employee benefits

Retirement benefit in the form of provident fund is a defined
contribution scheme. The contributions to the provident fund are
charged to the statement of profit and loss for the year when the
contributions to the respective fund are due. The Company has no
obligation, other than the contribution payable to the provident fund.

Gratuity liability under the Payment of Gratuity Act, 1972 is a defined
benefit obligation. The cost of providing benefits under this plan is
determined on the basis of actuarial valuation at each year-end.
Actuarial gains and losses are recognized in full in the period in
which they occur in the statement of profit and loss.

Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short- term employee benefit. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.

The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year- end. Actuarial gains / losses are immediately taken to the
statement of profit and loss and are not deferred. The Company presents
the entire leave as a current liability in the balance sheet, since it
does not have an unconditional right to defer its settlement for 12
months after the reporting date.

o) Income taxes

Tax expense comprises current and deferred income taxes. Current income
tax is measured at the amount expected to be paid to the tax
authorities in accordance with the Income-tax Act, 1961 enacted in
India. Deferred tax is measured using the tax rates and the tax laws
enacted or substantively enacted at the reporting date.

Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the reporting date.

Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognised only to the extent that
there is reasonable certainty that sufficient future taxable income
will be available against which such deferred tax assets can be
realised. As the Company has unabsorbed depreciation or carry forward
tax losses, deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that such deferred tax
assets can be realised against future taxable profits.

At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.

The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain that sufficient future taxable income will be
available.

Minimum Alternative Tax ('MAT') credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. In the year in
which the credit becomes eligible to be recognized as an asset in
accordance with the recommendations contained in Guidance Note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the profit and loss account and shown as
MAT Credit Entitlement. The Company reviews the same at each balance
sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the
effect that Company will pay normal Income Tax during the specified
period.

p) Employee stock compensation cost

Measurement and disclosure of the employee share-based payment plans is
done in accordance with SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
Accounting for Employee Share-based Payments, issued by the Institute
of Chartered Accountants of India. The Company measures compensation
cost relating to employee stock options using the intrinsic value as
applicable to the relevant grant. Compensation expense is amortized
over the vesting period of the option on a straight line basis.

q) Segment reporting

The Company's operations predominantly relate only to air
transportation services and accordingly this is the only primary
reportable segment. Further, the operations of the Company are
substantially limited within one geographical segment (India) and
accordingly this is considered the only reportable secondary segment.

r) Earnings Per Share ("EPS")

The earnings considered in ascertaining the Company's earnings per
share comprise the net profit or loss after tax attributable to equity
share holders. The number of shares used in computing basic earnings
per share is the weighted average number of shares outstanding during
the year. The number of shares used in computing diluted earnings per
share comprises the weighted average number of shares considered for
deriving basic earnings per share and also the weighted average number
of shares, if any, which would have been issued on the conversion of
all dilutive potential equity shares.

s) Provisions

A provision is recognized when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on best estimate of amounts
required to settle the obligation at the balance sheet date. These are
reviewed at each balance sheet date and adjusted to reflect the current
best estimates.

t) Contingent liabilities

A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or non
occurrence of one or more uncertain future events beyond the control of
Company or present obligation that is not recognized because it is not
probable that an outflow of resources will be required to settle the
obligation. A contingent liability also arises in extreme rare cases
where there is a liability that cannot be recognized because it cannot
be measured reliably. The Company does not recognise a contingent
liability but discloses its existence in the financial statements.

u) Cash and cash equivalents

Cash and cash equivalents for the purpose of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.

As permitted by the Guidance Note on the Revised Schedule VI to the
Companies Act, 1956, the Company has elected to present EBITDA as a
separate line item on the face of the statement of profit and loss. The
Company measures EBITDA on the basis of profit / (loss) from continuing
operations. In its measurement, the Company does not include
depreciation and amortization, finance costs, tax expense and, where
applicable, prior period items.

Mar 31, 2011

(a) Basis of preparation

The financial statements have been prepared to comply in all material
respects with the accounting standards notified by Companies Accounting
Standards Rules, 2006 (as amended) and the relevant provisions of the
Companies Act, 1956 ('the Act'). The financial statements have been
prepared under the historical cost convention on an accrual basis
except in case of assets for which provision for impairment is made and
revaluation is carried out, if applicable. The accounting policies have
been consistently applied by the Company and are consistent with those
used in the previous year, except for changes in accounting policy
discussed more fully elsewhere.

(b) Use of estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period end. Although these estimates are based upon management's best
knowledge of current events and actions, actual results could differ
from these estimates.

(c) Fixed assets

Fixed assets are stated at cost, less accumulated depreciation and
impairment losses if any. Cost comprises the purchase price and any
attributable cost of bringing the asset to its working condition for
its intended use. Borrowing costs relating to acquisition of fixed
assets which takes substantial period of time to get ready for its
intended use are also included to the extent they relate to the period
till such assets are ready to be put to use.

Advances paid towards the acquisition of fixed assets outstanding at
each balance sheet date and the cost of fixed assets not ready for
intended use before such date are disclosed under capital work-
in-progress.

(d) Depreciation

Depreciation is provided using the straight line method in the manner
specified in Schedule XIV to the Act, at the rates prescribed therein
or at the rates based on Management's estimate of the useful lives of
such assets, whichever is higher, as follows:

Asset Description Percentage

Office Equipment 4.75%

Computers 16.21%

Furniture and Fixtures 6.33%

Motor Vehicles 9.50% - 11.31%

Plant and Machinery 4.75%

Rotable and Tools 5.60%

Leasehold improvements are amortised over the estimated useful lives or
the remaining primary lease period, whichever is less. Assets
individually costing Rupees five thousand or less are fully depreciated
in the year of purchase.

(e) Intangible assets

Computer software

Costs incurred towards purchase of computer software are depreciated
using the straight-line method over a period of 3 years based on
management's estimate of useful lives of such software, or over the
license period of the software, whichever is shorter.

(f) Impairment

i. The carrying amounts of assets are reviewed at each balance sheet
date if there is any

indicationof impairment based on internal / external factors. An
impairment loss is recognized wherever the carrying amount of an asset
exceeds its recoverable amount. The recoverable amount is the greater
of the asset's net selling price and its value in use. In assessing
value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of the money and risks specific to
the asset.

ii. After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.

iii. A previously recognized impairment loss is increased or reversed
depending on changes in circumstances. However, the carrying value
after reversal is not increased beyond the carrying value that would
have prevailed by charging usual depreciation if there was no
impairment.

(g) Investments

Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. Provision for diminution in value is made to recognise a decline
other than temporary in the value of long term investments.

(h) Inventories

Inventories comprises of expendable aircraft spares and miscellaneous
stores. Inventories have been valued at cost or net realizable value,
whichever is lower after providing for obsolescence and other losses,
where considered necessary. Cost includes customs duty, taxes, freight
and other charges, as applicable and is determined using weighted
average method.

(i) Leases

Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss account on a straight-line basis over the lease
term.

Sale and lease back arrangements

Profit or loss on sale and lease back arrangements resulting in
operating leases are recognized immediately in case the transaction is
established at fair value, else the excess of the sale price over the
fair value is deferred and amortized over the period for which the
asset is expected to be used.

The sale and lease back arrangements entered into by the Company are as
per the standard commercial terms prevalent in the industry. The
Company does not have an option to buy back the aircraft, nor does it
have an option to renew or extend the lease after the expiry of the
lease.

(j) Provisions

A provision is recognized when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted
to its present value and are determined based on best estimate of
amounts required to settle the obligation at the balance sheet date.
These are reviewed at each balance sheet date and adjusted to reflect
the current best estimates.

(k) Revenue recognition

Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.

Passenger revenues and cargo revenues are recognised as and when
transportation is provided i.e. when the service is rendered. Amounts
received in advance towards travel bookings / reservations are shown
under current liabilities as unearned revenue.

Other operating revenues in the nature of fees charged from passengers
for reservation, changes in itinerary, cancellation of flight tickets
etc. are recognised as revenues on accrual basis.

Income in respect of hiring / renting out of equipments and spare parts
is due on time proportion basis at rates agreed with the lessee. Due to
significant uncertainties involved in realization, the income is
recorded on settlement with the lessee or actual realization, whichever
is earlier.

Interest

Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the rate applicable.

(l) Manufacturers incentives

(i) Cash Incentives

The Company receives incentives from Original equipment manufacturers
('OEM's') of aircraft components in connection with acquisition of
aircrafts. These incentives are recognized as income coinciding with
delivery of the related aircrafts as there are no further conditions
required to be fulfilled.

(ii) Non-cash Incentives

Free of cost spare parts received in respect of purchase of aircraft's
are recorded at a nominal value.

During the current year, the Company has changed its accounting policy
on accounting for free of cost spare parts received. Previously, the
Company was recording the free of cost spare parts received at their
fair value. The management believes that such a change will result in a
more appropriate presentation of assets under generally accepted
accounting standards in India. Had the Company continued to use its
earlier policy in accounting for free of cost spare parts, the profit
after taxation for the current year would have been higher by Rs.
22.20 million, the gross block of fixed assets would have been higher
by Rs. 18.97 million and the inventory as at the year end would have
been higher by Rs.8.75 million.

(m) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur. Borrowing costs consist of interest
and other costs that an entity incurs in connection with the borrowing
of funds.

(n) Foreign currency transactions

(i) Initial Recognition

Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.

(ii) Conversion

Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.

(iii) Exchange Differences

Exchange differences, in respect of accounting periods commencing on or
after December 7, 2006, arising on reporting of long-term foreign
currency monetary items at rates different from those at which they
were initially recorded during the period, or reported in previous
financial statements, in so far as they relate to the acquisition of a
depreciable capital asset, are added to or deducted from the cost of
the asset and are depreciated over the balance life of the asset, and
in other cases, are accumulated in a "Foreign Currency Monetary Item
Translation Difference Account" in the Company's financial statements
and amortized over the balance period of such long-term asset /
liability but not beyond accounting period ending on or before March
31, 2011.

Exchange differences arising on the settlement of monetary items not
covered above, or on reporting such monetary items of company at rates
different from those at which they were initially recorded during the
year, or reported in previous financial statements, are recognized as
income or as expenses in the year in which they arise.

(o) Aircraft maintenance costs and engine repairs

Aircraft, Auxiliary Power Unit ('APU') and Engine maintenance and
repair costs are expensed as incurred. In cases where such overhaul
costs in respect of engines / APU are covered by third party
maintenance agreements, these are accounted in accordance therewith.

(p) Retirement and other employee benefits

Retirement benefit in the form of provident fund is a defined
contribution scheme and the contributions are charged to the Profit and
Loss Account of the year when the contributions to the respective fund
are due. There are no other obligations other than the contribution
payable to the respective funds.

Gratuity liability under the Payment of Gratuity Act, 1972 is a defined
benefit obligation and is provided for on the basis of actuarial
valuation on projected unit credit method made at the end of each
financial year.

Short term compensated absences are provided for based on estimates.
Long term compensated absences are provided for based on actuarial
valuation on projected unit credit method made at the end of each
financial year.

Actuarial gains / losses are immediately taken to profit and loss
account and are not deferred.

(q) Taxation

Tax expense comprises current and deferred income taxes. Current income
tax is measured at the amount expected to be paid to the tax
authorities in accordance with the Income-tax Act, 1961 enacted in
India. Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years.

Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. If the Company
has unabsorbed depreciation or carry forward tax losses, deferred tax
assets are recognised only if there is virtual certainty supported by
convincing evidence that such deferred tax assets can be realised
against future taxable profits.

The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. At each balance sheet date the Company re- assesses
unrecognised deferred tax assets. It recognises unrecognised deferred
tax assets to the extent that it has become reasonably certain or
virtually certain, as the case may be that sufficient future taxable
income will be available against which such deferred tax assets can be
realised.

Minimum Alternative Tax ('MAT') credit is recognised as an asset only
when and to the extent there is convincing evidence that the company
will pay normal income tax during the specified period. In the year in
which the credit becomes eligible to be recognized as an asset in
accordance with the recommendations contained in Guidance Note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the profit and loss account and shown as
MAT Credit Entitlement. The Company reviews the same at each balance
sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the
effect that Company will pay normal Income Tax during the specified
period.

(r) Cash and cash equivalents

Cash and cash equivalents for the purpose of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.

(s) Earnings per Share ("EPS")

The earnings considered in ascertaining the Company's earnings per
share comprise the net profit or loss after tax attributable to equity
share holders. The number of shares used in computing basic earnings
per share is the weighted average number of shares outstanding during
the year.

The number of shares used in computing diluted earnings per share
comprises the weighted average number of shares considered for deriving
basic earnings per share and also the weighted average number of
shares, if any, which would have been issued on the conversion of all
dilutive potential equity shares.

(t) Employee stock compensation expenses

Measurement and disclosure of the employee share-based payment plans is
done in accordance with SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
Accounting for Employee Share-based Payments, issued by the Institute
of Chartered Accountants of India. The Company measures compensation
cost relating to employee stock options using the intrinsic value as
applicable to the relevant grant. Compensation expense is amortized
over the vesting period of the option on a straight line basis.

Mar 31, 2010

1. BASIS OF ACCOUNTING

The financial statements have been prepared to comply with the
Accounting Standards referred to in the Companies (Accounting
standards) Rules 2006 issued by the Central Government in exercise of
the power conferred under sub-section (1) (a) of section 642 and the
relevant provisions of the Companies Act, 1956 (the Act). The fi
nancial statements have been prepared on a going concern basis under
the historical cost convention on accrual basis. The accounting
policies have been consistently applied by the Company unless otherwise
stated.

2. USE OF ESTIMATES

The preparation of the fi nancial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities
on the date of the fi nancial statements and the results of operations
during the reporting periods. Although these estimates are based upon
managements best knowledge of current events and actions, actual
results could differ from those estimates. Any revisions to accounting
estimates are recognised in the current and future periods.

3. FIXED ASSETS

Tangible assets

Fixed Assets are carried at cost less depreciation and impairment loss,
if any. The cost of fi xed assets are inclusive of duties, taxes,
interest on borrowings attributable to acquisition of fi xed asset and
other incidental costs incurred upto the time the assets are ready for
their intended use. Spares which can be used only in connection with
aircrafts and whose use is expected to be irregular are included in fi
xed assets at cost.

Advances paid towards the acquisition of fi xed assets outstanding at
each balance sheet date and the cost of fi xed assets not ready for
intended use before such date are disclosed under capital
work-in-progress.

Intangible assets

Intangible assets comprises of software which is not an integral part
of the related hardware. The cost of software comprises of acquisition
charges and implementation fee.

4. DEPRECIATION AND AMORTISATION

Depreciation on fi xed assets, other than on software classifi ed as
Intangible, is provided pro-rata on the straight line method, at the
rates and in the manner prescribed under Schedule XIV of the Companies
Act, 1956 or useful life of the asset whichever is shorter.

Intangible assets comprising of software is amortised over a period of
3 years based on estimated useful life as determined by the management.

5. IMPAIRMENT OF ASSETS

The Company reviews the carrying amounts of assets at each balance
sheet date to ascertain if there is any indication of impairment. An
impairment loss is recognised wherever the carrying amount of an asset
exceeds its recoverable amount. After impairment, depreciation is
provided on the revised carrying amount of the asset over its remaining
useful life. The impairment loss recognised in the prior account- ing
period is reversed if there is change in the estimate of the
recoverable amount. However, the carry- ing value after reversal is not
increased beyond the carrying value that would have prevailed by
charging usual depreciation if there was no impairment.

6. INVESTMENTS

Long-term investments are stated at cost. Provision for diminution in
the value of long-term investments is made only if such a decline is
other than temporary in the opinion of the management. Current invest-
ments are carried at lower of cost or fair value. Cost for computation
of profi t or loss on sale of invest- ment is computed on the basis of
weighted average method.

Inventories have been valued at cost or net realizable value (NRV)
whichever is lower after providing for obsolescence and other losses,
where considered necessary. Cost includes customs duty, taxes, freight
and other charges, as applicable and is determined using weighted
average method.

8. REVENUE RECOGNITION

Revenue is recognised to the extent that it is probable that the
economic benefi ts will fl ow to the Com- pany and the revenue can be
reliably measured. Revenue recognition policies in respect of some of
the specifi c transactions are as under:

Passenger revenue

Passenger income is recognised when transportation is provided i.e.
when the service is rendered. Amounts received pursuant to travel
bookings/ reservations (net of cancellations) but not recognized as
income is shown under current liabilities as unearned revenue.

Other operating revenues

Other operating revenues comprise of revenues from cargo operations and
other miscellaneous fee charged from passengers.

Cargo revenue is recognized on completion of services i.e. when goods
are transported.

Income in respect of leasing/ renting out of equipments and spare parts
is due on time proportion basis at rates agreed with the lessee. Due to
signifi cant uncertainties involved in realization, the income is
recorded on settlement with the lessee or actual realization, whichever
is earlier.

Interest

Interest income is recognised using time proportion method, based on
the rate implicit in the transaction.

Dividend

Dividend income is recognised when Companys right to receive dividend
is established.

9. LEASES

Operating lease payments are recognised as an expense in the profi t
and loss account on a straight line basis over the lease term.

Sale and lease back transaction

Profi t or loss on sale and lease back arrangements resulting in
operating leases are recognised, in case the transaction is established
at fair value, else the excess over the fair value is deferred and
amortized over the period for which the asset is expected to be used.
Free of cost spare parts received in respect of purchase of air crafts
are recorded at their fair value. This fair value is recorded as other
income upon sale of air crafts.

10. FOREIGN EXCHANGE TRANSACTIONS

Transactions in foreign currency are accounted for at the exchange rate
prevailing on the date of the transaction. All monetary items
denominated in foreign currency are converted at the year-end rate.

The exchange differences arising on such conversion, except for
conversion of long term monetary items, and exchange differences
arising on the settlement of the transactions are dealt within the
profi t and loss account.

As per the amendment of the Companies (Accounting Standard) Rules,
2006-AS 11 relating to The Effects of Changes in Foreign Exchange
Rates exchange difference arising on conversion of conversion of long
term foreign currency monetary items is recorded under the head
Foreign Currency Monetary Item Translation Difference Account and is
amortised over period not extending beyond, earlier of March 31, 2011
or maturity date of underlying long term foreign currency monetary
items.

11. EMPLOYEE BENEFITS

Wages, salaries, bonuses, paid annual leave and sick leave are accrued
in the year in which the as- sociated services are rendered by
employees of the Company. The un-availed leaves are allowed to be
accumulated to be availed in next fi nancial year and therefore, are
considered as a short term benefi t. Such accumulated leaves are
provided in full on the basis of last drawn salary.

The Company provides Provident fund and Gratuity to its employees as
post retirement benefits.

Provident fund benefit is a defi ned contribution plan under which the
Company pays fi xed contributions into a fund established under
Employees Provident Fund and Miscellaneous Provision Act, 1953. The
Company has no legal or constructive obligations to pay further
contributions after payment of the fi xed contribution. The
contributions recognised in respect of defi ned contribution plans are
expensed as they fall due. Liabilities and assets may be recognised if
underpayment or prepayment has occurred and are included in current
liabilities or current assets as they are normally of a short term
nature.

The Company provides for gratuity, a defi ned benefi t plan, which defi
nes an amount of benefi t that an employee will receive on retirement,
usually dependent on one or more factors such as age, years of service
and remuneration. The legal obligation for any benefi ts from this kind
of plan remains with the Company, even if plan assets for funding the
defi ned benefi t plan have been acquired. The liability recog- nised
in the balance sheet for defi ned benefi t plans is the present value
of the defi ned benefi t obligation (DBO) at the balance sheet date
less the fair value of plan assets, together with adjustments for
unrec- ognised actuarial gains or losses and past service costs. The
DBO is calculated annually by independent actuaries using the projected
unit credit method.

12. EMPLOYEE STOCK OPTION PLAN

The Company values stock options granted to employees at excess of
market price of the share on the date of grant over the exercise price
of the options granted. The value of stock options granted is amortised
on a straight line basis over the vesting period as employee
compensation and the unamortized portion carried as deferred employee
compensation grouped under Reserves and Surplus.

13. AIRCRAFT MAINTENANCE COSTS AND ENGINE REPAIRS

Aircraft, Auxiliary Power Unit (APU) and Engine maintenance and repair
costs are expensed as incurred except where such overhaul costs in
respect of engines/ APU are covered by third party maintenance
agreements, which are accounted in accordance therewith.

14. PROVISIONS AND CONTINGENCIES

Provision is recognised when the Company has a present obligation as a
result of past event and it is probable that an outfl ow of resources
will be required to settle the obligation, in respect of which reliable
estimate can be made. Provisions are not discounted to present value
and are determined based on best estimate required to settle the
obligation on the Balance Sheet date. These are reviewed at each
Balance Sheet date and adjusted to refl ect the current best estimates.
A disclosure for a contingent liability is made when there is a present
obligation that may, but probably will not, require an outfl ow of
resources. Disclosure is also made in respect of a present obligation
as a result of past event that probably requires an outfl ow of
resource, where it is not possible to make a reliable estimate of the
outfl ow. Where there is a present obligation in respect of which the
likelihood of outfl ow of resources is remote, no provision or
disclosure is made. Contingent assets are not recognised in the fi
nancial statements. However, contingent assets are assessed continually
and if it is virtually certain that an infl ow of economic benefi ts
will arise, the asset and related income are recognised in the period
in which the change occurs.

15. TAXATION

Provision for tax comprises current, deferred and fringe benefi t tax.
Current tax is provided for on the taxable profi ts of the year at
applicable tax rates. Fringe benefi t tax is provided for the amount
expected to be paid to the Income tax authorities. Deferred income
taxes refl ect the impact of current year timing differences between
taxable income and accounting income for the year and reversal of
timing differences of earlier years. Deferred tax is measured based on
the tax rates and the tax laws enacted or substantively enacted at the
balance sheet date. Deferred tax assets are recognised only to the
extent that there is reasonable certainty that suffi cient future
taxable income will be available against which such deferred tax assets
can be realised. Deferred tax assets are recognised on carry forward of
unabsorbed depreciation and tax losses only if there is virtual
certainty that such deferred tax assets can be realised against future
taxable profi ts.

Minimum Alternative Tax credit ("MAT credit") is recognized as an asset
only when and to the extent there is convincing evidence that the
Company will pay normal income tax during the specifi ed period. In
the year in which the MAT credit becomes eligible to be recognized as
an asset in accordance with the recommendations contained in guidance
note issued by the Institute of Chartered Accountants of India the said
asset is created by way of a credit to the profi t and loss account and
shown as MAT credit entitlement. The Company reviews the same at each
balance sheet date and writes down the carrying amount of MAT credit
entitlement to the extent there is no longer convincing evidence to the
effect that Company will pay normal income tax during the specifi ed
period.

16. EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the net profi t or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they were entitled to partici- pate in dividends relative
to a fully paid equity share during the reporting period.

For the purpose of calculating diluted earnings per share, net profi t
or loss for the year attributable to eq- uity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.

17. ACCOUNTING FOR DERIVATIVE CONTRACTS

The Company enters into derivatives contract to hedge its risk arising
from the fl uctuation in commodity market. Gain or loss on settlement
of such contracts is recorded as Operating cost. At every period end
all outstanding derivative contracts are fair valued on a marked-to
market basis and any loss on valua- tion is recognised in the profi t
and loss account, on each contract basis. Any gain on marked-to-market
valuation on respective contracts is not recognized by the Company,
keeping in view the principle of prudence as enunciated in AS 1,
Disclosure of Accounting Policies. Any subsequent changes in fair
values, occurring after the balance sheet date, is accounted in the
subsequent period.